One way to get a Dollar's worth of work for 50 - 60 cents

16 years ago

Your message about contributing food to the postal people's food drive for the food banks reminded me of a message that I've told around here (in Canada, that is).

We have boxes beside the doors of food stores and many churches and one can give food at firehalls, also, to go to local food banks.

When I buy food at the grocery to put into that box, it makes the store owner happy, as he just sold some food that he wouldn't have, to serve my household ... but the managers of many of such stores, being a branch of a national chain, don't care, as they get their wages, in any case.

When I buy food there, I pay retail price - say $1.00. And I buy whatever I choose, with little regard/awareness of what the food bank people and their clients would prefer/choose.

A couple of times a year some of our food stores encourage us to make a monetary contribution when we check out, to go to a local social service agency that helps the homeless and disadvantaged people. It's helpful to the food store ... as they get a deductible credit for "their gift" to the food bank - for they get the charitable receipt.

That is preferable from the food bank's point of view, for it allows them to purchase the foods which they choose, and to get them at wholesale - say, 80 cents.

If, however, I visit the food bank myself and write them a cheque ... they can buy the goods which they prefer, plus get them at the wholesale price. Also, they give me a receipt for a charitable donation, which helps me when I pay my income tax, as I am allowed to use it to make a substantial reduction in my tax liability, both federal and provincial.

It's generous, at 15% federally and just over 6% provincially on the first $200., and on all amounts above that (up to about 3/4 of my income) they allow deduction at top rate - 29% federal and somewhere around 12% provincial rate.

That works also if I make a contribution to the food bank via the London Community Foundation.

Which means that I get that $1.00 value of goods at retail ... for somewhere around 50 - 60 cents. I like them apples: value like that makes my frugal heart happy!

In addition, if I make a gift of stocks or mutual funds to a charity, e.g. the London Community Foundation, where the value has appreciated, I get a charitable receipt for the full value at the current price ...

... and I avoid any capital gains tax, i.e. liability on the increased value of the stock after I bought it.

If I contribute a stock that I bought at just over $4.00 a share, 43 years ago, paying a dividend of 10 - 12 cents then, whose "value" (whatever that means - let's say, "selling price") was $107.00 or so in June of '07, that had some exposure to the U.S. financial fiasco a couple of years ago, so saw their "value" ... or, let's say, "price" drop to about $40.00 later that year, and recover quite a way, then drop again last winter, and recently have recovered to around $75 ...

... being able to avoid any tax liability on that level of capital gain is an important consideration.

By the way - that stock was paying me $3.08 dividend annually in June '07, and they increased it to annual rate of $3.48 that autumn ... and have maintained it through the intervening period, which means that it was paying about 8%, back when the stock price dropped to $40.00 or so.

So ... effectively, not only do I get that $1.00 of value of food at retail for 50 - 60 cents ... but I make a major tax saving by avoiding capital gain tax on the increased value of my contribution.

Usually, I get half of the capital gain tax free, but am taxable at usual rate on the other half.

I like them peaches really well ... in addition to the apples that I liked, earlier.

Wouldn't you?

ole joyful

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